Michael Lisovetsky (NYU Stern’15) is a serial entrepreneur and the CEO & Founder of Skylight, an app that helps you sublet your apartment or find one.
What is Skylight?
Skylight is a flexible term rental platform. When you need a place for a few months but you don’t want to commit to a year long lease, Skylight is where you go. Skylight is where you find that place to rent for those few months, while remaining in line with New York City law by focusing on subleases above 30 days.
The traditional term today is called subletting or subleasing. The idea is that we make it really easy and then facilitate the payments between people. Money has always been a really awkward sticking point because the people that move in are often times strangers, that you don’t know. So there’s this friction involved. We allow people to just pay via debit or credit card and we automate that entire process. You put in your debit or credit card, we charge it 3–4 days before the first of the month, and then as soon as the first comes up that money is in the sublessor’s bank account.
Who are the parties within it (i.e. renter, sublessor, landlord)?
A sublease agreement is when a sublessor and a sublessee sign and then you just transfer the payments as long as there’s a happy mediator in between. Let’s say that you, as the sublessee, rent from September through March. That gives assurance to the sublessor that they will get paid every month. The ideal case is that people inform their landlord as well.
What we’ve noticed is that there’s been a fundamental shift in how people are renting. You have millions of millennials going towards cities. These millennials aren’t familiar with how high paced these cities are, and how renting typically works. These people come in, they don’t have jobs yet, and they’re unsure of their future. The idea of a 12 month lease is daunting. You even have some people that are successful but are subleasing because of the flexibility involved and the requirements are not as stringent.
How does it work for the sublessor?
If they’re the sublessor, meaning they want to sublet out their room, they download the app and login with Facebook. We use Facebook because we want a layer of familiarity. You then go to my listings. We are actually going to be offering a service where, if you request, we will send out a photographer as well.
So once you find the sublessee on the platform what happens next?
At that point, as a sublessor, you accept a sublessee. If someone requests to chat with you, you have to actually approve that chat request. You have to make sure this person seems legitimate. Once you’re comfortable speaking with them, you have to set up a time with them to come see it. Once they’ve seen it you, as the sublessor, send the sublessee a request with dates and other relevant information. The sublessee puts in their payment details, fills everything out, and clicks submit. At that point, they are committing to pay you for the term and then we hold the funds in escrow. Meaning let’s say today is the 9th of March and if you rent today for April 1 we hold those funds in between. We’ve found that holding about 1 month of rent in escrow keeps people from bailing.
While that process is going on, the sublessor can see a rating on that sublessee’s credit, right?
We’re not launching with that. We are launching initially with the notion that if this person wants to pay you in good faith, using their credit or debit card, you will get it every month on the 1st. The next version will have credit ratings, background checks, and we are coming up with a proprietary algorithm which is our score for this person. Instead us having a credit score that can be completely irrelevant, someone’s past payment history over 2 years would be much better. Later down the line we are looking at features where we might be able to offer discounts on rent because if you connect your bank and credit card accounts we don’t have to trust your credit score since we know how much money you have. They are rewarded for us not having to guess.
When did the idea for Skylight come about, and how does that relate to the status on your other company (HomeSwipe)?
We were about 15 months into HomeSwipe and we were looking for a better way to execute on our vision, which was building a platform around real estate. We took a step back and looked at our users over the 15 months and asked: “what have these people been asking us for?” We realized that people just needed more flexible terms. People needed a way to avoid a traditional 12 month lease. Even when we asked many of our friends we found out that many of them were subletting. My partner and I are subletting right now. In the past people that were subletting were for some reason unqualified and couldn’t get a real lease. Life circumstances change and technology allows us to build in that liquidity so people can swap rooms.
It wasn’t really a spark but more of a saturation point. The advice that I always give is just to do it because the only way you can learn is if you are in the trenches doing it. These were learnings that just added up over 15 months of not getting it right. We were iterating and iterating.
What are some of the fascinating things you’ve learned doing your MVP (Minimum Viable Product) on Facebook (i.e. subletting group)?
It’s been incredible. The group has been an MVP for about 6 months. It is just a great way to test ideas. So a lot of times I’ll go to an investor meeting and go “this is how we are going to grow the app, get users, get landlords”. They are ideas until you put them into the real world. Now it’s no longer an assumption or a random hope but I’m running on tangible proof. We have about 13,000 members out of nowhere with $0 spent. If those 13,000 people were paying rent right now that’d be over $13 million per month in revenue. About $1,000 each times 13,000. I’m not saying that would ever happen, but best case means a lot of potential energy bottling up.
Do you feel that Skylight will service only that ad-hoc short term need or is there potential for it to mature into a process of renting long-term?
One of our advisors is the Director of Special Projects, at WeWork, and he’s told us that even though people sign up for a month to month office, they stay for 15 months. They are afraid of a year commitment but they’ll stay longer than a year. We expect people, once they get into the flexibility, to play into it. Right now, it’s incredibly uncertain to do it. There’s no feeling of guarantee that you can find a place. When you make it easy enough to find a tenet and a place, people will get into it.
The second perspective we have is seeing Airbnb as owning the market for weekends and weeks, Skylight to own the month to month rental market, and Zillow or Streeteasy to own the year long lease. We see it as something growing out of a need and turning into a want.
Is there potential for this platform to become the de facto payment processor for all rental arrangements?
We see, in 10 years, the 12 month lease not being a thing. It’s not that I’m just making up the future. When you look to Europe and the rest of the world, 12 month leases don’t exist. People rent month to month indefinitely until they give 30 day notice. The biggest innovation we’re adding is paying credit or debit, but if you’re a millennial how do you expect to pay rent. “What the hell is a check?” I don’t have a checkbook. Real estate is one of the few legacy industries that gets away being so incompetent and incredibly old because the landlords hold 100% of the power. That’s it they have the power. Tenants have no say. You can have tenant rights, but at the end of the day, they own the supply so they set the pricing. They’re going to determine what your stay is going to be like. The conditions of your property. They are able to get away with providing a poor experience. Right now, we’re in a transitory period where the internet is such a strong force but a lot of our traditional industries haven’t shifted over. Real estate is one of the industries, where a company like Skylight, will preempt that shift.